Further reliefs for companies in Malaysia amid COVID-19

As Malaysia enters the fifth week of the Movement Control Order, to fight the COVID-19 pandemic the Securities Commission Malaysia (SC) announced further reliefs for public listed companies (PLCs). At the same time, it is also considering additional measures to facilitate greater access to funding for small and midcap companies, as well as Micro, Small and Medium Enterprises (MSMEs).

In a press release yesterday, Datuk Syed Zaid Albar, Chairman of the SC said: “With this Covid -19 pandemic, we are confronting a situation that none of us has experienced in our lifetimes. It requires measured responses that consider the longer term impact on our market and its participants, beyond this immediate crisis.”

In line with that the regulator revealed four key measures it will be taking:

#1 Further regulatory reliefs for PLCs

Understanding that companies may face challenges as a result of the pandemic, the SC announced that Bursa Malaysia (Bursa) will provide affected companies listed on the Main Market temporary relief from the Practice Note 17 (PN 17) classification in relation to the following criteria:

the shareholders’ equity of the listed issuer on a consolidated basis is 25% or less of the share capital (excluding treasury shares) of the listed issuer and such shareholders’ equity is less than RM40mn.

the auditors have highlighted a material uncertainty related to going concern or expressed a qualification on the listed issuer’s ability to continue as a going concern in the listed issuer’s latest audited financial statements and the shareholders’ equity of the listed issuer on a consolidated basis is 50% or less of share capital (excluding treasury shares) of the listed issuer.

a default in payment by a listed issuer, its major subsidiary or major associated company, as the case may be, as announced by a listed issuer pursuant to paragraph 9.19A of the Listing Requirements and the listed issuer is unable to provide a solvency declaration to the Exchange.

These measures will allow companies more time to regularise their financial positions. Similar temporary relief from Guidance Note 3 classification will also be provided by Bursa for companies listed on ACE Market. This PN17 relaxation will be effective from 17 April 2020 until 30 June 2021.

#2 Greater fundraising access for smaller companies

To help MSMEs tap into alternative fundraising channels, the SC also lifted fundraising limits on Equity Crowdfunding (ECF) platforms, and allowed ECF and peer-to-peer financing (P2P) platforms to operationalise secondary trading, both with immediate effect.

From now until 30 September 2020, the government co-investment fund MyCIF, administered by the SC, has also increased its funding matching ratio from 1:4 to 1:2 for eligible ECF and P2P campaigns, to provide additional liquidity into the alternative fundraising space.

#3 Accelerate digitisation of capital markets

In line with the new norm of going digital and working from home, the SC will expedite guidelines for holding virtual general meetings. It will also review the Rules On Take-Overs and Mergers to facilitate e-service of documents and compliance with regulatory requirements for take-over and merger transactions.

The regulator is also working on efforts to broaden the suite of product offerings of fund management industry through facilitating the introduction of waqf-based collective investment schemes and alternative investments for wholesale funds, where underlying assets can be property, gold or private equity.

Noting that extraordinary times call for extraordinary responses, Syed Zaid said this is not business as usual and that the SC is deploying a wide range of regulatory tools to provide support to the market and relief to market participants.

#4 Maintain market integrity and investors’ protection

While the regulator is doing what it can to support the businesses, Syed Zaid said the SC remains steadfast in ensuring investor interest is protected during this challenging time.

“We continue to raise investor awareness on scams, as scammers tend to target people during times of uncertainty. The SC will take a targeted approach to protect vulnerable investors and minority shareholders. I would also like to remind our intermediaries to remain vigilant and for PLCs to remember their obligations to shareholders and to make timely disclosures,” he stressed.

The SC also assured investors that the Malaysian capital market remains fundamentally strong and is functioning in an orderly manner, supported by deep domestic liquidity, complemented by the Government’s stimulus packages, amidst non-resident outflows.

Speaking to journalists during the announcement of the SC’s Annual Report for 2019, Syed Zaid said: “While the world comes together to combat this public health emergency, we have taken proactive measures to ensure that markets continue to operate in an orderly manner, as access to funding is vital to maintain confidence and ensure the long-term recovery of the market.”